The Freelancer & Contractor Services Association has had to change their planned holiday pay requirement for umbrella members, according to reports by ContractorUK.
It looks like an FCSA member has thrown their toys out of the pram about the proposed FCSA code (code = standard required for membership) amendment which would prevent members withholding holiday pay from contractors!
ContractorUK understands that section A10 (d) was to state: “Save for any holiday entitlement which is carried over…you must not retain any accrued holiday pay beyond the end of the relevant holiday year.” This has since been amended to: “[You] confirm that you make reasonable effort to ensure that employees receive their full holiday entitlement each holiday year.”
The new wording is subjective in terms of what constitutes making a ‘reasonable effort’ to ensure contractors receive their holiday entitlement, and paves the way for FCSA members to potentially not ensure their contractors receive holiday.
Why is this important?
Discussions on the thorny issue of holiday pay have been ongoing for some time. All workers in the UK are entitled to receive 5.6 weeks paid holiday annually, and this statutory right applies to temporary workers as well as employees. There are obvious difficulties with ensuring temps and contractors receive paid time off because they are generally only paid for the time that they work on assignment. That’s why the industry norm for many years has been for the assignment rate (charged to clients who engage temps and contractors) to include an amount that covers the time off accrued by the worker during any given assignment.
Some umbrella contracts include a ‘use it or lose it’ policy requiring their workers to claim their accrued holiday by a certain date or it will be lost. In that scenario, the amount paid by clients for the workers’ holiday becomes profit for the umbrella in question. This practice was exposed on BBC Radio 4’s Moneybox programme in March 2021, and some umbrellas have been accused of deliberately profiteering from their workers’ holiday.
Legal arguments have emerged aiming to justify the practice. These are based around the working time directive (which dictates the statutory holiday right) which requires workers to have rest time away from work. If workers are being paid for their holiday instead of taking it as rest time, it is unlawful because it contradicts the working time directive. It has been suggested that this is the reason why some umbrellas have a ‘use it or lose it’ policy in relation to holiday pay, and that such a policy is actually in workers’ best interests to ensure that they get their rest! We are supposed to believe that the profit generated by not paying the accrued holiday is entirely unrelated to the contractual provision.
Funnily enough, this legal perspective has only come to the fore following accusations of holiday pay being deliberately with-held from umbrella workers. If this is truly the reason for holiday pay (already paid for by the end-client) being with-held, why has an unlawful industry standard been in place unchallenged for many many years? The fact remains that umbrellas and recruitment agencies that with-hold holiday pay can generate extremely large volumes of profit in this way. So we have to ask ourselves objectively, who’s interest is such a policy really in?
Why was FCSA’s new standard changed?
Putting the legal
excuses arguments to one side, ContractorUK’s article suggests that FCSA’s planned membership standard on holiday pay, which would have been very beneficial for contractors, has been amended due to one of their members taking exception to the new standard – so much so that they threatened to take legal action against FCSA. We cannot think of any reason why the new standard might be so unacceptable to an FCSA member that they would consider the expense of taking legal action, except that they wish to continue profiting by not paying holiday.
We sympathise with FCSA being bullied in this way, we know from our experience that the sector can be very litigious due to the sums of money involved. In an ideal world, any FCSA member(s) not wishing to adhere to an agreed new standard should simply resign.